Founder sues Papa John's board to stop 'irreparable harm'

WILMINGTON, Del. (Reuters) - The founder and largest shareholder of Papa John’s International Inc sued the pizza chain’s board and chief executive late on Thursday to stop what he described as “the irreparable harm” they are causing the company, according to a court filing.

John Schnatter (R), founder and chief executive of Papa John's Pizza, arrives at the 2011 American Music Awards in Los Angeles November 20, 2011. REUTERS/Danny Moloshok/File Photo

John Schnatter has been in an escalating battle with the company’s board since he stepped down as chairman in July after he apologized for using a racial slur during a media training call.

Schnatter remains a member of the board and holds 30 percent of the company’s shares.

Schnatter is suing the board and CEO Steve Ritchie “to stop the irreparable harm those individuals are causing due to their repeated, and ongoing, breaches of the duties of loyalty and care they owe to the company,” according to a statement from Schnatter.

Papa John’s said the allegations were without merit.

“John Schnatter will do anything to distract attention from the harm caused by his inappropriate words,” said the company in a statement. “He continues to make reckless allegations in his attempt to regain control and serve his own interests.”

The lawsuit filed was under seal in Delaware’s Court of Chancery, and Schnatter asked the court to expedite the case.

On Thursday, the company criticized Schnatter publicly for attending a meeting in July about a potential deal with hamburger chain Wendy’s Co without Ritchie present, as the board had instructed.

A Papa John’s shareholder also filed a lawsuit on Thursday seeking class-action status, accusing the company and Schnatter of securities fraud for concealing his alleged inappropriate workplace conduct, and how its code of ethics was inadequate to prevent it.

Shares of Papa John’s were flat at $46.02 on Friday.

Reporting by Tom Hals in Wilmington, Delaware; additional reporting by Liana B. Baker in New York; Editing by Bill Rigby